Konnichiwa and Au Revoir
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What are the key market moves and currency shifts this morning?
A swift market reaction to the new likely PM for Japan and a rapid departure for France's latest PM adds to the political uncertainty there and another big tech deal. This time it's AMD and OpenAI massively adding to the valuation for OpenAI. But is it also adding to the prospect of a tech bubble whilst the US shutdown rolls on? It's Tuesday, it's the 7th of October 2025. It's the morning call from NAB. Good morning. Good morning. Well, a 0.4% rise in the US dollar today, back over 98 on the DXY. The Aussie is up 0.2% to 66.2 US cents, but a big fall in the yen. We'll come to that this morning. Mix for US stocks. The Dow is down, but the S&P is up 0.5%. 0.9% for the Nasdaq. The major European indices all down a little bit, and bond yields higher almost everywhere.
For 10-year yields, up four basis points for Treasuries, up five for gilts, up six in France. Aussie 10-years have gone from 4.33% yesterday to 4.41% this morning. And oil is up, no doubt, helped by that less-than-expected increase to supplies from next month. So Brent is up 1.5% today to 65.50 a barrel. And NAB's Gavin Friend is with me today, joining us from London. So two countries to look at, first of all, Japan and France. With Japan, the yen is down 1.8% today. The Nikkei surged 4.8% and hit a record high. Expectations for a rate hike before December has fallen, all because of their new LDP leader, presumably the next prime minister, Sane Takeichi. And we've seen the market fall out as a response to all of this.
Yeah, that's right. Just to remind ourselves, this wasn't the expected outcome going into that election. Subject to parliamentary approval, Takeuchi will become the new Japanese PM, the first female PM, as well as uniting an increasingly divided LDP party, which presumably She'll do through increased nationalism, increased defence spending, sort of a Japan-first approach, pushing back on immigration, which is a big concern of LDP voters who have been leaving in droves for more populist Conservative parties. But she's also a Shinzo Abe protege in favour of fiscal stimulus, and it seems a more cautious approach to BOJ tightening. It's worth saying in the melee of Monday trade after a weekend win, as you say, Japanese stocks soared by nearly 5%.
The yen fell, as did short-term yields, on the premise of easier monetary policy, while long-term yields rose. 30-year yields in Japan up 14 basis points to 3.3. However, whilst higher longer-term yields seems right, we're seeing that in other markets as well, in the US, in France, and we'll discuss this, There's something not quite right about the idea of lower short-term yields, even easy monetary policy or easier monetary policy in an environment where fiscal policy becomes more expansive. And indeed, comments from one of her advisors Monday said, spoke of a slower pace of BOJ hikes, not a reversal or a necessary resistance. Moreover, we can argue that a weaker yen won't play well with the Trump White House.
So I think we need the dust to settle. There's a period of time now before the parliamentary vote And, you know, time for, you know, a clearer steer on policy prescription and, you know, where this is going to go. But, you know, higher longer-term yields seems right. A weaker yen, question mark. You know, and certainly the idea of if you're going to have – if your main platform, policy platform, apart from, you know, sort of a nationalistic approach is – easier fiscal policy, more spending, then you're going to have to offset that with at least as tight monetary policy. Now, you know, we can argue maybe this pushes back, in those words of that advisor today, the timing of BOJ hikes, BOJ rate hikes, the extent to which I think is the unanswered
question. Yeah, and they're not going to rush into it anyway, obviously, because it's 15th of October before Parliament resumes when they actually elect their new Prime Minister, presuming it is her. She's got to formulate her policies, form a cabinet. I mean, it would be premature, wouldn't it, for the Bosch to make any decisions before all of that is settled.
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